When thinking of the field of real estate investment, the first thought that comes to mind is buying a piece of property. It often seems as if purchasing physical properties are the only way to reap the benefits of being a real estate investor. That’s actually a common misconception. While buying property is one way to invest in real estate, it isn’t the only one. There are four other easy ways to become a real estate investor that doesn’t require the hands-on work of maintaining a piece of property and require less of an initial investment.
Real estate stocks
One way to get exposure to the real estate market is by investing your money into real estate related stocks. These are stocks of large companies that conduct real estate related business. Some examples of these would be housing materials stocks, homebuilder stocks or construction company stocks.
REITs
REITs stands for real estate investment trusts, which are companies that own investment properties. These can be bought and sold in the same way as stocks. Traditionally, they hold a variety of real estate properties such as offices, apartments, and malls. Because REITs pool together investments, generate investment income and capital gains, and allow investors to invest in a portfolio of diverse assets, REITs are similar to mutual funds.
Real estate funds
A real estate fund is a mutual fund that invests into real estate related stocks, REITs and properties directly. They allow investors to hold a diverse real estate investment portfolio without needing a lot of capital to begin. They differ from REITs because real estate funds invest into REITs, property and real estate stocks directly. REITs directly hold property investments. By investing in real estate funds, you have a more diverse portfolio than you gain by investing in REITs.
Real estate crowdfunding
Real estate crowdfunding is a new way to invest in real estate properties. There are a few real estate crowdfunding platforms currently in use in the United States, including RealtyShares and Fundrise. On these platforms, investments start as low as $5,000. These platforms are an easy way to invest in large commercial properties that you otherwise would have no access to as a small, independent investor.